Tax fraud charges are a serious matter and are pursued aggressively by the Internal Revenue Service (IRS) and its investigators. Both individuals and businesses often wait until the 11th hour to prepare their taxes and may try to avoid the additional expense of a professional tax specialist by doing their taxes themselves.
As with any project that is undertaken without ample time, taxes prepared under these conditions can contain mistakes or omissions that could result in increased scrutiny from the IRS. Tax fraud can result in serious civil and criminal legal consequences, ranging from fines or penalties to more serious sanctions such as incarceration or restitution.
Consequently, it is advisable for anyone who is the subject of an IRS investigation or who is facing federal criminal charges regarding tax fraud to retain the services of an experienced Virginia federal tax fraud lawyer as soon as possible.
Simply put, tax fraud or evasion involves intentionally evading paying taxes owed. Individuals, corporations, or other entities may engage in tax fraud, including conduct such as misrepresenting income, underdeclaring profits, overstating deductions, or hiding income. It is distinct from tax avoidance, which is the lawful use of the tax code in order to minimize a taxpayer’s tax liability.
In addition, simple mistakes or oversights do not rise to the level of fraud; a taxpayer must intend to defraud the IRS in order to be civilly or criminally liable. Because finding direct evidence of intent can be difficult, the IRS and its investigators look for certain “badges of fraud” in order to determine whether a taxpayer intended to avoid paying taxes.
As a Virginia tax fraud lawyer can tell you, it is common for the government to misinterpret mere mistakes as having criminal intent, which is why it is important to have an experienced attorney review the facts of your case. Some examples of these “badges of fraud” include:
As indicated above, tax fraud can result in both criminal and civil penalties. In addition, a taxpayer may be the subject of both a criminal and civil investigation at the same time, a situation known as “parallel investigation.” A civil investigation is generally triggered when the facts and circumstances regarding a taxpayer’s conduct indicate that fraud has occurred.
In order to impose civil penalties, the IRS must establish that a taxpayer engaged in fraud by clear and convincing evidence, which is a legal standard that indicates that the allegations are more highly likely to be true than not, and that the judge or jury has a strong belief in the veracity of the claims.
It is important to note that the IRS distinguishes intentional fraud from reliance on incorrect advice from a tax professional, inadvertence, honest difference of opinion, negligence, or carelessness.
When a tax matter rises to the level of potentially criminal misconduct, an investigation may be conducted by the Internal Revenue Service Criminal Investigation Division. This branch of the IRS is responsible for investigating taxpayers who have allegedly violated portions of the Internal Revenue Code, as well as other alleged violations of the Bank Secrecy Act or various statutes that deal with money laundering.
Criminal IRS investigations are usually initiated by an auditor revenue officer who believes that a particular taxpayer may be engaging in fraudulent activity. In addition, there are avenues for the public to refer potential tax evaders to the IRS. Finally, law enforcement and United States Attorney’s Office may also alert the IRS to potential tax fraud.
When a referral is received, special agents will conduct a primary investigation, looking at the available data to determine whether there is evidence of a financial crime. From there, the matter may be dropped or could be followed up by a more thorough investigation, with agents interviewing witnesses, conducting surveillance on the suspect, subpoenaing bank records, and conducting a more thorough review of financial data.
If the investigation uncovers evidence of criminal activity that may support a prosecution, the matter will be referred to the Department of Justice or the US Attorney’s Office, depending on the type of violation.
Tax fraud is a serious legal matter that may result in serious legal consequences. With so much at stake, it is highly advisable that anyone who is the subject of an IRS investigation or has already had a case brought against them talk to an experienced Virginia tax fraud lawyer.
The attorneys at our firm are dedicated to helping people with tax issues resolve their matters quickly and efficiently, and our attorneys work hard to mitigate any legal consequences our clients may be facing. To schedule a free consultation with one of our Virginia tax fraud attorneys, call our office today.
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